5 Ways To Teach Your Kids To Spend Wisely

Now that our daughter gets a weekly allowance, the most common verb that comes out of her mouth is BUY.

Daddy, I’m going to BUY (insert latest craze that all the kids have) with my allowance. (Insert friend’s name) has 5 and they’re soooooo cute. Don’t you think they’re cute, Daddy?

Um, yeah, I guess so. Actually, it looks a bit like a couple of toys you already have. I bet they were made in the same factory. They have the same colourful, fuzzy hair, but their face has just been squished up a bit and they’ve been repackaged. Great marketing strategy, isn’t it?

Daddyyyyyyyyyyyyyy! Stop it!

Yes, deciding to dole out the allowance was the easy part.

The hard part is teaching her how to deal with all the newfound cash.

There are Two Sides to the Income Statement

051Of course, she is smart enough to know that she earned the money and so it should be hers to spend as she wishes.

And I have to admit that she has a good point.

However, I think that we would be grossly negligent as parents if we only addressed the income side of the equation.

Too many adults go through their whole life not paying attention to the outflows, and their personal financial situations usually suffer dearly because of it. If we want our children to learn to be responsible with money – a skill they will carry with them into adulthood – then we need to start teaching them as soon as they have some of it to spend.

Yes, there will be plenty of worthy items that the kids want to purchase that we will have no problems with: books, art supplies, toys that foster creative thinking, etc.

There will even be the odd impulse purchase of something fun or funky.

But there will also be items that our kids will want to buy that are, quite frankly, garbage that will end up as landfill sooner rather than later.

So how can we convince them that they don’t need these things without them feeling like we are telling them how to spend their money?

1. Ask Questions. A Lot of Questions.

First and foremost, we have to undertake the game of persuasion. This is a game that any good salesperson or negotiator spends years perfecting.

But we don’t have years to wait. We have to learn how to do this NOW!

The good news is that it really comes down to this: ask questions.

A lot of them.

This will help your kids come to their own realization that what they think they need isn’t really necessary.

Or, it will help them decide that it really is worth spending their money on.

Here are some of my favourites:

  • Why do you want to buy one of those?
  • What are you going to do with it?
  • What do you already have that is quite similar?
  • What are you going to do with the other similar items you already have?
  • What makes this item so unique that you need to spend your money on it rather than on something else?
  • How long do you think you will be happy with it before you want yet another similar item?
  • Can you think of an experience or future need that might be a better way to spend your money?
  • Can’t you just borrow one of your friend’s 5 different iterations of the item and play together with them?
  • If you buy the item, where will it end up after you are bored with it? (follow up with environmental guilt-trip)

I’m sure you can think of dozens more. If nothing else, it will get your kid thinking a bit.

However, they may still want something that you really feel is a waste of money. At this point it is time to employ some stalling tactics.

2. Make Them Wait

Make them wait a few weeks. Or months. 😆

This is a great tactic that I personally employ with my own money when I think I need something. I make myself wait a while and, more often than not, I realize I didn’t need that thing in the first place and never end up buying it.

So make them wait.

Don’t take them shopping with you. Tell them outright that they should wait a month and see if they still want it. Chances are there will be a new craze by then.

3. Be A Good Role Model

We also have more direct talks with our daughter about the vicious cycle of always wanting more.

We constantly discuss the virtue of being happy with what you have. We practice what we preach by modelling good spending habits. We don’t come home with the latest gadget every time we go shopping. We DON’T GO SHOPPING unless absolutely necessary.

Kids can see your habits from a mile away and will develop the same. You are their mentor!

4. Practice Asset Allocation

Good money managers all know the importance of strategic asset allocation, so why not teach it to your kids?

A soon as our daughter got her first allowance, we discussed the difference between short term cash and long-term savings and created a separate “account” for each.

Every week when she gets her allowance, she puts 25% of it into long-term savings – an account she may not touch for years.

Yes, this isn’t quite as much as her parents put aside, but our hope is that she will slowly work up to that as she starts seeing the benefits of her growing nest-egg.

At 8 years old, she still has plenty of time.

Some people also like their kids to have a “charity” account. However, we find that two accounts keeps it simple, and when opportunities to give arise, she can use the short-term account to make a donation.

I think that she will “feel” the “giving” more this way, seeing a good portion of her weekly allowance go to a good cause.

5. Just Say No

If all else fails and you feel really strongly about something, just say NO!

That’s what I did with the toy with the scrunched up face.

Oh yeah, she was upset with me for a day or two and kept mentioning it for a week or so.

But funnily enough about a month later she just came out one day and said,

“Daddy, I don’t think I want one of those any more. I want an (insert new craze that all her friends have) instead.”

I had about a millisecond to feel smug.

But just a millisecond before I pressed the repeat button.

“Why do you want to buy one of those?”

 How about you? Do you have any suggestions for teaching our kids how to spend wisely? Share your wisdom with our community by posting in the comments box below.



  1. Very timely post, Scott, with the gorge-on-gifts season fast approaching. Your list of questions works for grown-ups too. It was a combination of those and Item 2 (“Make Them Wait”) that made us realize recently we didn’t really need an iPad after all in a home with four computers (for the record: two of them ancient and one supplied for free by my employer), a Kindle, smartphones, etc. Most of the time you realize in the cold light of day that you were just falling for ye olde retail strategy of manufacturing need through buy-now-or-miss-out-forever “firesales” which inevitably repeat after a few weeks.

  2. Glad you enjoyed the article, Anderson. Think of how many days of skiing or shares of your favourite stock you can buy with that saved cash!

  3. Scott,

    Thanks for wading into a seldom discussed area: teaching children financial management.

    Our family used the opposite approach as you. I’d call your system of an allowance as a salary vs. piece work as our children received. Once our kids were old enough to want to help (as opposed to being old enough to really be helpful) they were paid for all work around the house. They received twenty five cents for setting the table, twenty five cents for clearing the table, two dollars for washing dishes, etc. They were responsible for:
    Completing jobs around the house they volunteered for, at a prearranged rate
    Keeping track of jobs completed and amount earned in a notebook or pad
    Billing parents regularly; every week, every few days, whatever.
    Keeping the money safely in a wallet or purse.
    Planning for items they needed, wanted, saving the money or giving some away
    Making good decisions or mistakes and learning from them

    Talking to them now in adulthood about the struggles they went through deciding if what they wanted to buy was really worth parting with their hard earned cash, I appreciate the lessons they learned about priorities, trade offs, and the empowerment that came from knowing that a long days work on Saturday could mean getting something they really wanted. They could also spend Saturday on the coach if they preferred. My daughter always seemed to have more money than my son. His choice.

    Because they had many, many work opportunities they had excess and would save when I explained how the bank pays them to hold their money. Getting their money to earn for them was a popular idea!

    The excess they saved over all the years growing up; for my son was just enough to buy the engagement ring for his fiancé. And for my daughter it paid for a semester in Spain. All their idea.

    This has worked beautifully with grandchildren as well when they visit.

    • Thanks for sharing your experiences, Betsy. I really love your approach, and in fact I think I am going to implement some of your ideas immediately. Having the kids keep track of their work and get paid for what they actually do is very empowering. I love the idea of the invoice each week!

      • Scott,

        I’m so glad you are interested in trying some of the ideas.

        I remember being in a store with my 6 year old daughter when she came to me and asked if she could get a very cute fluffy kitten toy. I told her of course and asked if she had brought her money. (I would loan them the money until we got home if they hadn’t brought theirs.) She said “I don’t want to spend my money on that.” I told her that was fine and her decision. For me to not have to decide how important it really was for her was such a stress reducer and avoided a entire area of conflict.

        As a ten year old she would come to me on a Saturday morning and ask what jobs she could do to earn $5. We thought up a list of jobs and before long the work was done.

        Sometimes parents have been concerned that they can’t afford to be paying the kids for every little job around the house, but I disagree. You will spend it one way or the other anyway, why not give them the freedom and responsibility to earn and learn?

        You may be surprised how competent and responsible your children are. Let me know how it goes.

      • Scott,

        Just came across this again and am wondering how your kids are doing now that they bill you for their work?


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